What’s Ahead for the Supply Chain in 2014?

In terms of influential activity and policy decisions affecting the healthcare supply chain, it’s doubtful that Washington will be able to top the year it had in 2013. In fact, to fully grasp the health policy landscape in 2014, one needs to briefly reconsider the activity of the past year.

Track & trace. The Drug Quality and Safety Act of 2013 (DQSA) contained two important matters affecting the security and quality of the nation’s healthcare supply chain. The first included the so-called “track & trace” provisions. Title II of the Act created a uniform national standard for drug supply chain security and established a lot-level tracking system for enhanced security, with a 10-year transition period to a unit level system. It preempts state law (e.g., California) and maintains both floor and ceiling licensure standards for wholesale distributors and third-party-logistics providers, while preserving state authority for licensure issuance and fee collection.

Compounding. The second provision (Title 1) in the DQSA was enacted in response to several meningitis outbreak tragedies. Title I clarifies FDA’s authority over the compounding of human drugs while requiring the agency to engage and coordinate with states to ensure the safety of compounded drugs. Among other things, the bill permits entities engaged in the compounding of sterile drugs to register as “outsourcing facilities” subject to good manufacturing practices, risk-based inspection, and other new standards.
Unique device identification (UDI). The U.S. Food and Drug Administration implemented the UDI system for medical devices. It is worth noting that HSCA successfully argued that the FDA should adopt the international date format in its UDI final rule in order to avoid unnecessary confusion in the global supply chain. It took two acts of Congress to get the Administration to ultimately issue these regulations, and it will take a few additional years to get them sorted out in the business world.

Medical device tax. While the medical device tax technically went into effect on Dec. 31, 2012, 2013 saw the device industry apply a full court press on Congress to repeal the measure. It remains to be seen whether 2014 will be their year. While it has become politically popular on Capitol Hill to talk about repeal, budgetary “offsets” required to pay for the $30 billion price tag of repeal continue to be elusive – not to mention the veto threat issued by the Obama Administration. In 2013, HSCA voiced its concern that some manufacturers were passing on the cost of the 2.3 percent tax to healthcare providers and created www.devicetaxwatch.com in response.

Meaningful use. The Medicare and Medicaid Electronic Health Record (EHR) Incentive Programs are well known and provide financial incentives for the “meaningful use” of certified EHR technology to improve patient care. To receive an EHR incentive payment, providers have to show that they are “meaningfully using” their EHRs by meeting thresholds for a number of objectives. Stage I requirements of “meaningful use” began in 2012, Stage II requirements will begin in 2014 and Stage III requirements in 2016. In 2013, however, the Centers for Medicare and Medicaid Services (CMS) issued several changes to the Stage 1 EHR objectives, measures, and exclusions for eligible professionals (EPs), eligible hospitals, and critical access hospitals (CAHs). These changes took effect on Oct. 1, 2012, for eligible hospitals and Critical Access Hospitals, and on Jan. 1, 2013, for EPs. Although some of the changes to meaningful use objectives, measures, and exclusions are optional, others are required. EPs participate in the program on the calendar years, while eligible hospitals and CAHs participate according to the federal fiscal year. Imagine a world in which EHRs were connected with the supply chain using UDI, track & trace serialization and related standards and protocols.

Drug shortages. Unfortunately, the issue of drug shortages remained in the headlines throughout the year and into 2014. In fact, the list of drugs in shortage is not expected to improve any time in the near future. To help explain the role of the GPO industry in mitigating the impact of critical prescription drug shortages, HSCA created a new website to serve as a clearinghouse of information on what GPOs were doing to combat drug shortages. (See www.drugshortage.org.) More efforts to address the drug shortage can be anticipated in 2014. (For a full discussion, see, “Drug shortages: GPOs are part of the solution,” in the December 2013 issue of the Journal of Healthcare Contracting.)

340B Program Notice. On Feb. 7, 2013, the Health Resources and Services Administration (HRSA) issued a Program Notice intended to ensure 340B Program integrity. The Program Notice, however, caused substantial confusion and uncertainty regarding whether it is possible, in practice, for a 340B Program-covered entity to comply without maintaining separate physical inventories for drugs purchased through the 340B Program and drugs purchased through GPOs. HRSA extended the compliance deadline from April 7, 2013, to Aug. 7, 2013, and issued a Question and Answer statement meant to allay some of the concerns. Additional regulatory, and perhaps, legislative action can expected in 2014.

Transparency. For the first time, CMS released Medicare’s cost of medical device prices. This unprecedented release of data by CMS highlighted huge differences around the United States in what
hospitals charge for different procedures. In May 2013, CMS released data regarding 100 of the most common Medicare diagnosis-related groups, including procedures involving stents, orthopedic devices and pacemakers. More data dumps of this variety and more Medicare transparency should be anticipated in 2014 and beyond.

Initial public offering. In September, Premier, Inc. (NYSE: PINC) joined the growing ranks of group purchasing organizations that have gone to the capital markets for financing. MedAssets (MDAS) went public in December 2007. Hospital Corporation of America (HCA) went public in February 2011 and maintains the GPO affiliate HealthTrust Purchasing Group. In addition to the movement to the markets, this trend also shows the growing direction of GPOs to go beyond mere contracting and into new and important roles as solutions providers.

Affordable Care Act. 2014 will be remembered as the year the Affordable Care Act was officially implemented, especially its provisions that expand health insurance coverage. That doesn’t mean 2013 didn’t have its share of ACA-related events. The more than 40 votes held by the Republican-held House of Representatives to repeal the law, the Obama Administration’s botched enrollment roll-out and the Administration’s tweaks and changes to the law’s health insurance mandate provisions were enough to keep us all guessing.

By no means is this list exhaustive, and issues from bundled payments to value-based purchasing to GPO cost-savings could all have easily cracked the Top Ten. What’s on your list?